November 28, 2011
Authored by: Mark Newcomer and John Readey
The Penn State scandal has dominated media headlines in recent weeks. While the vast majority of the coverage has been directed toward the alleged criminal acts and potential cover-ups, there has been a fair amount of buzz surrounding Joe Paterno’s July 2011 transfer of his entire interest in his home to his wife for $1. Many have speculated that Joe Paterno had no legitimate reason to transfer sole ownership of the house to his wife, and that he must be trying to shield assets from potential civil litigation. While I will not speculate as to Joe Paterno’s rationale for making such a transfer, I believe it is incorrect to take the position that there is no legitimate reason for doing so. In many instances, spouses can reduce their potential estate tax burden by making inter-spousal transfers of assets.
The following is a simple example of how an inter-spousal transfer can